NEW YORK (TheStreet) -- General Electric Co. (GE) - Get General Electric Company (GE) Report shares are rallying 3.49% to $26.36 in early morning trading on Monday after activist investor Nelson Peltz's Trian Fund Management took a $2.5 billion stake in the company.
"We invested in GE because it is undervalued and underappreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive share-owner returns," Nelson Peltz, CEO and a founding partner of Trian, said, according to CNBC.com.
This investment is the largest in the activist hedge fund's history, and makes the firm a top 10 shareholder, the Financial Times reports.
Additionally, TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio, commented on GE this morning saying:
Before you think about the General Electric (GE)-Trian Fund situation, before you yawn, or dismiss or downplay the $2.5 billion stake he has taken, remember this: Nelson Peltz is the only activist we could find when I wrote "Get Rich Carefully", with whom you beat the market after the announcement of his stake.
In other words, if you bought the stock today, you did great. You topped the S&P 500.
Separately, TheStreet Ratings team rates GENERAL ELECTRIC CO as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate GENERAL ELECTRIC CO (GE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GE's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 0.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $6,299.00 million or 20.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.68%.
- 40.46% is the gross profit margin for GENERAL ELECTRIC CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -4.25% trails the industry average.
- The debt-to-equity ratio is very high at 2.89 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Industrial Conglomerates industry and the overall market, GENERAL ELECTRIC CO's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: GE